Swifty Company issued its 7%, 25-year mortgage bonds in the principal amount of $3,230,000 on January 2, 2011, at a discount of $135,000, which it proceeded to amortize by charges to expense over the life of the issue on a straight-line basis. The indenture securing the issue provided that the bonds could be called for redemption in total but not in part at any time before maturity at 105% of the principal amount, but it did not provide for any sinking fund. On December 18, 2025, the company issued its 11%, 20-year debenture bonds in the principal amount of $4,180,000 at 103, and the proceeds were used to redeem the 7%, 25-year mortgage bonds on January 2, 2026. The indenture securing the new issue did not provide for any sinking fund or for redemption before maturity. a. Prepare journal entries to record the issuance of the 11% bonds and the redemption of the 7% bonds. (Record entries in the order displayed in the problem statement. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries.) Account Titles and Explanation Cash. Bonds Payable Premium on Bonds Payable Bonds Payable Loss on Redemption of Bonds Cash Discount on Bonds Payable The Debit b1. Indicate the income statement treatment of the gain or loss from redemption. is reported as 4,305,400 Credit KORDO
Swifty Company issued its 7%, 25-year mortgage bonds in the principal amount of $3,230,000 on January 2, 2011, at a discount of $135,000, which it proceeded to amortize by charges to expense over the life of the issue on a straight-line basis. The indenture securing the issue provided that the bonds could be called for redemption in total but not in part at any time before maturity at 105% of the principal amount, but it did not provide for any sinking fund. On December 18, 2025, the company issued its 11%, 20-year debenture bonds in the principal amount of $4,180,000 at 103, and the proceeds were used to redeem the 7%, 25-year mortgage bonds on January 2, 2026. The indenture securing the new issue did not provide for any sinking fund or for redemption before maturity. a. Prepare journal entries to record the issuance of the 11% bonds and the redemption of the 7% bonds. (Record entries in the order displayed in the problem statement. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries.) Account Titles and Explanation Cash. Bonds Payable Premium on Bonds Payable Bonds Payable Loss on Redemption of Bonds Cash Discount on Bonds Payable The Debit b1. Indicate the income statement treatment of the gain or loss from redemption. is reported as 4,305,400 Credit KORDO
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Swifty Company issued its 7%, 25-year mortgage bonds in the principal amount of $3,230,000 on January 2, 2011, at a
discount of $135,000, which it proceeded to amortize by charges to expense over the life of the issue on a straight-line
basis. The indenture securing the issue provided that the bonds could be called for redemption in total but not in part at
any time before maturity at 105% of the principal amount, but it did not provide for any sinking fund.
On December 18, 2025, the company issued its 11%, 20-year debenture bonds in the principal amount of
$4,180,000 at 103, and the proceeds were used to redeem the 7%, 25-year mortgage bonds on January 2, 2026. The
indenture securing the new issue did not provide for any sinking fund or for redemption before maturity.
a. Prepare journal entries to record the issuance of the 11% bonds and the redemption of the 7% bonds. (Record
entries in the order displayed in the problem statement. If no entry is required, select "No Entry" for
the account titles and enter 0 for the amounts. Credit account titles are automatically indented
when the amount is entered. Do not indent manually. List all debit entries before credit entries.)
Account Titles and Explanation
Cash
Bonds Payable
Premium on Bonds Payable
Bonds Payable
Loss on Redemption of Bonds
Cash
Discount on Bonds Payable
The
Debit
b1. Indicate the income statement treatment of the gain or loss from redemption.
is reported as
4,305,400
Credit
ONU
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